Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.93 billion yuan, +17.5% year over year; realized net profit of 0.31 billion yuan, +10.9% year over year; realized net profit deducted from non-mother 0.31 billion yuan, +38.2% year over year. According to estimates, 24Q2 achieved revenue of 0.97 billion yuan, +20.4% year over year; realized net profit of 0.11 billion yuan, +21.8% year over year; realized net profit of 0.12 billion yuan without return to mother, +43.0% year over year.
Hemorrhoid treatment products have performed well, the scale of representative varieties of Big Health has increased rapidly, and there has been a restorative growth in the pharmaceutical business.
1) In the pharmaceutical industry sector, 24H1's parent company achieved revenue of 1 billion yuan, +17.5%. The company deepened pharmaceutical channel marketing transformation, strengthened retail channel terminal marketing, and deepened the potential of the third- and fourth-tier market. Revenue of hemorrhoid treatment products was +22.0% YoY, and sales scale of representative categories such as eye care products and sanitary wipes series products grew rapidly, driving the revenue ratio of Big Health +33.3% year over year;
2) Medical service revenue was -7.6% year-on-year, mainly due to the decline in the scale of the medical service supply chain business. At the same time, the company accelerated the joint construction plan for 100 key anorectal specialists across the country. Nine new anorectal diagnosis and treatment centers were signed in the first half of the year, bringing the total number of signatories to 89;
3) Pharmaceutical commercial revenue was +17.0% year-on-year, mainly due to dynamic optimization of product sequences in pharmaceutical retail, adjustment of customer structure and increase in supply variety, driving restorative growth in the sector.
Gross margin improved significantly, and net return on investment disrupted net interest rate performance. 24H1's gross margin was 48.4%, up 4.6pct year on year; sales expense ratio was 23.4%, up 1.6 pct year on year, mainly due to increased expenditure and investment in big health business market planning. Management cost ratio, R&D cost rate and financial expense ratio all declined slightly; net investment income decreased by 0.069 billion yuan. Disposal of long-term equity during the same period last year led to a high base, and net income from fair value changes decreased by 0.017 billion yuan; under the combined impact of 24H1 net profit of 16.8%, down year on year 1.1 pct Among them, the 24Q2 company's gross profit margin and net interest rate changed by 3.0 pct and -0.5 pct respectively, and the expense ratio improved during the period.
Investment advice: The company takes the anorectal and lower digestive tract fields as its core position, creates an anorectal health solution provider, and vigorously develops the health industry. In the anorectal category, brands have accumulated deep and established an advantageous position in the anorectal market segment. As an industry leader, it is expected to enjoy a higher growth rate than the industry as a whole, and the volume and price can be expected; the skin and ophthalmology category broadens category boundaries and forms flank support; further extending to health management throughout the life cycle. Under the low base of the big health industry, it is expected to reap performance elasticity through brand and channel collaboration, explore and build a second growth curve. It is predicted that the company's net profit for 2024-2026 will be 0.585, 0.676, and 0.774 billion yuan, respectively, and EPS will be 1.36, 1.57, and 1.79 yuan respectively. The current stock price corresponding to 2024-2026 PE will be 20, 17, and 15 times, respectively, maintaining the “gain” rating.
Risk warning: changes in regulatory policies, intensification of industry competition, product sales falling short of expectations, new product promotion falling short of expectations, R&D risks, quality and safety risks.